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Oversupply predicted to fuel 20% property declines
Sydney and Melbourne could experience a drop of up to 20 per cent in property prices in some areas as early as next year, given the supply of apartments coming on stream, an Australian economist has predicted.

Oversupply predicted to fuel 20% property declines
Sydney and Melbourne could experience a drop of up to 20 per cent in property prices in some areas as early as next year, given the supply of apartments coming on stream, an Australian economist has predicted.

AMP chief economist Shane Oliver says prices in Australia’s hottest property markets are likely headed for citywide falls.
“My base case would be at some point in the next couple of years, prices will fall 5 to 10 per cent in Sydney and Melbourne,” Mr Oliver told Nest Egg.
“It probably requires a turn-up in the RBA’s interest rate cycle. I don’t think the banks are enough to do that on their own.”
However, with a steady supply of apartments still coming on stream in specific areas across the two cities, the price pain should be more acute in some suburbs than others.
Mr Oliver said apartment-saturated suburbs could see declines of up to 20 per cent.
“I think sharp falls of 15 to 20 per cent could be more constrained to suburbs with lots of cranes, and more constrained to apartments as opposed to houses. In Melbourne, that apartment supply seems to be more concentrated to the inner city, whereas in Sydney it’s in those satellite centres like Chatswood and Parramatta,” he said.
“But if you're looking at standalone houses in the eastern suburbs of Sydney or the most of the suburbs of Melbourne, or out at Campbelltown and the Hills district, you’re probably looking at price declines, when they start to kick in at the start of next year, contained around 5 per cent.”
While Melbourne remains more at risk given its burgeoning apartment oversupply, those price declines could be followed by stabilisation if both cities act on housing affordability, Mr Oliver said.
“If state governments are serious about improving the affordability issue, and particularly expanding supply on a fundamental basis, that should help keep house prices down in the years ahead which should in turn gradually help improve affordability.”

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